RBI/2004-05/418
UBD(PCB). / BPD/Cir. 43 / 09.72.00 /2004-05
April 11, 2005.
The Chief Executive Officers of All Primary (Urban) Co-operative
Banks
Dear Sir/Madam,
Donations / Contributions for public /charitable
purposes out of profits of UCBs
Some of the State Co-operative Societies Acts
and the Multi-State Co-operative Societies Act permit co-operative societies
registered there under to set apart a certain portion of their net profits as
charity fund and give donation out of such fund for development of co-operative
movement, charitable or any other public purpose. It has come to the notice
of the Reserve Bank that large donations are being made by urban co-operative
banks for various purposes from out of the charity fund so created, which adversely
affect the interest of depositors of the banks. The matter has been examined
and it is considered necessary, in the public interest and in the interest of
the depositors, that donation made by primary (urban) co-operative banks should
be regulated.
2. In view of the above, it has been decided
that the normal donations to be made during a year, may, in aggregate, be restricted
to a ceiling of 1% of the published profits of the bank for the previous year.
Such normal donations, together with those that may be made to National Funds
and other funds recognized/sponsored by the Central / State Government, during
a year, may not exceed 2% of the published profits of the bank for the previous
year. The above restriction shall be applicable to all primary (urban) co-operative
banks notwithstanding funds, if any, available in the charity fund or any similar
reserve created under the provision of any other legislation.
3. These instructions are issued under Section
35A of the Banking Regulation Act, 1949 (AACS) and any contravention of instructions
or non-compliance with the same will attract penalties under the relevant provisions
of the Act.
4. Please acknowledge receipt to the concerned
Regional Office of the Reserve Bank of India.
Yours faithfully,
(N.S.Vishwanathan)
Chief General Manger
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